From our sister publication FO Pro: The Family Office Professional

K&S LLC: Same floor, different mission

“We have a lot of interaction between the family office and the corporation, but they are separate. The family office is on the same floor as the executives: You come off the elevator and go one way to Amy's area and the other way to the CRST executives,” says John Smith.

How does it work when you create a family office that has close ties to the family's operating business yet is a separate entity? 

Amy Lynch is the CEO of K&S LLC, the family office of the John and Dyan Smith family, which owns and operates trucking company CRST, The Transportation Solution, Inc. John Smith is chairman of the board of CRST. The Smiths formed K&S to manage their household liquid investments in 2012, and hired its first employee, the CIO, that year. Lynch joined from Deloitte in 2015. She is also chief of staff for Hillcrest Holdings, Inc., the holding company that owns K&S, CRST and several other businesses the family owns. Hillcrest and CRST are based in Cedar Rapids, Iowa.  

They discuss the close relationship between the business and the family office — how it started, and how both the business and the family have benefited from it: 

How did you decide to set up the family office? 

John Smith: I had been investing with Morgan Stanley for a number of years — we were taking money out of the company at the time so that we could diversify our investments. The man who is now our CIO cold-called me. I thought he made some sense, so I gave half the money to him and half to Morgan Stanley and watched it. After a number of years, he made a proposal that he would work for us full-time as an employee. After a few years, we were really happy with his investments, and he had cut our costs. He thought we could begin the process of opening a family office.  

 I knew Amy through our relationship with Deloitte. She was the most unlikely tax person I had ever met: She got along with everybody but knew her taxes. Our tax work was getting very expensive. I said to Amy, ‘Let's get a family office going. No. 1, I think, is to start doing taxes internally. After that, I don't know — I don't know what family offices do. But one thing I don't want is for you to be a travel agent. Other than that, we're open to seeing how it develops.' 

How has setting up the family office benefited the family and the business? 

John Smith: We have a lot of interaction between the family office and the corporation, but they are separate. The family office is on the same floor as the executives: You come off the elevator and go one way to Amy's area and the other way to the CRST executives.  

The business didn't have some expertise that the family office had — that's been really fantastic. For example, when the business became a C-Corp., they didn't have anyone who knew taxes, because taxes had all been with the shareholders. So, they relied on the tax expert Amy had hired through her family office connections.  

The real estate used by CRST has always been owned by the family [vs. inside the corporation]. So, because of the family ownership, the family office has done a lot of work with the real estate holdings.  

Amy's work has also helped keep the family together. She meets individually with each of our families and makes sure that the family office is providing helpful services to each family branch. She has been very good about making sure that everyone feels part of the family. 

What does it mean to say that the Smiths are an enterprise family? 

Amy Lynch: K&S is a single-family office of an enterprise family — one that has essentially committed to owning assets together and developing a footprint of wealth together. They own businesses together, own real estate together and do philanthropy together. They've committed to say, ‘We want to invest as an enterprise and think about all the ways that our collective capital can help advance our family's mission.' Their enterprise is growing; it's complicated, expanding, and different from year to year. 

 They had some functions more characteristic of an embedded family office prior to my hire — the trucking company CFO was handling some of the functions that the family office does now. 

 The family is amazing in terms of cohesiveness — not just agreement, but really talking through things and understanding the common vision they have. That doesn't mean every conversation is easy. We've got a lot of different points of view and a family that works well together, and we want to maintain that. I haven't run into a situation yet where the family is unable to build consensus. They've committed to making decisions as a family — that's what it means to be an enterprise family.  

Has investing through the family office helped engage the next generation? 

John Smith: The family office generally invests family members' personal money, and family members also look for ways to invest the business' money. We are aiming for diversification. 

 My son and my son-in-law presented a plan to us that they wanted to diversify our holdings — they wanted to make investments into other non-transportation-related businesses to see what impact that could make on our holdings. Based on that, we bought a property development company in Iowa City and a cybersecurity company in the D.C. area. We make acquisitions with the intention to hold for the long term.  

What have you learned from running the family office? 

John Smith: You've got to get the right people. We are so lucky to have somebody that knows us and knows the business.  

 Also, some people go into a family office with a specific idea of what they want. We didn't have strong ideas — we were flexible. Every year I tell Amy, ‘I'm sure glad we did this. It has really helped the family and I think you have helped the business.' 

FO Pro: The Family Office Professional is Family Business Magazine's sister publication, dedicated to helping families think through their family office options and helping family office executives navigate family issues. In every issue of Family Business, we'll feature a few key stories from FO Pro. To receive our complimentary weekly newsletter, sign up here: https://thefopro.com/newsletters/

FO Pro: The Family Office Professional is edited by Margaret Steen. Based in Silicon Valley, she has written for Family Business Magazine for more than 15 years. Contact her at msteen@thefopro.com.

About the Author(s)

Margaret Steen

Margaret Steen is a freelance writer and frequent contributor to Family Business.


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